While it’s often believed that letting cannabis stores open in a neighborhood will drive down property values, a new report from real estate company Tomo says not so fast.
Instead, Tomo found that, on average, if a dispensary opens in your area, you’re likely to see an additional $4,400 increase in your property value each year.
The firm said in the report that it assessed various factors that cause real estate prices to fluctuate in Colorado, Michigan, and Oregon – states where cannabis is legal and available from storefront merchants, with enough time in-market to identify the pre- and post-legalization impacts of recreational cannabis dispensaries on home prices.
The report also looked at the annual increase (or decrease) in median home prices in ZIP codes with a dispensary, compared to median home price changes in the surrounding ZIP codes, and aggregated findings across cities in multiple states to uncover the trends.
Higher valuations
A key factor in the report’s results is the fact that dispensaries are often relegated to less desirable parts of cities, often due to proximity restrictions with churches and schools. Median incomes in these neighborhoods were lower that other neighborhoods, which often resulted in lower home valuations.
“In Denver, for example, ZIP codes with dispensaries had an 80% lower median home price than the rest of the city,” the report stated. “And, starting from a lower price point, the median home price in these areas has increased 6.9 percentage points higher than the rest of the city since 2020. To put that into perspective, median single-family home prices in ZIP codes with cannabis dispensaries increased $123,000 in the last four years, while the rest of the city only increased $16,000.”
Another more extreme scenario occurred in Detroit, where adult-use sales began in January 2023. A typical home near an adult-use dispensary in Detroit sold for just $38,000 in 2020 versus $127,000 in the rest of the city. Tomo says that the same home would now sell for nearly double that – $70,000 – while the rest of the city grew by only 31% during the same period.
Store quality varies
Of course, not every dispensary looks the same. Some can be very down-to-earth with a desire not to put on any airs, while others look like high-end tech stores with designer fixtures. However, most employ security staff and make sure the entrance is welcoming. This can have a lifting effect in those less desirable neighborhoods.
Still, cities with high median incomes that feature luxury cannabis dispensaries also enjoy a little real estate valuation boost. Tomo pointed to Boulder, Colorado, where homes were valued at $1.5 million in ZIP codes with dispensaries versus $1.25 million in ZIP codes without dispensaries. The report also found that the value of these homes continues to rise 2% every year on average.
That boost isn’t universal, however. Homes in Ann Arbor, Michigan, for example, saw a significant decrease in price after the first recreational dispensaries opened in 2023. According to the report, prices in areas with a dispensary fell 0.84% over the past year, while the rest of the city saw increases of 6.6%.
Oregon also experienced some outliers within the report. Cornelius, which is outside of Portland, saw home prices grow 23% in ZIP codes with a dispensary. However, Portland saw multiyear declines on single-family homes.
Payoffs
Tomo also suggested that reinvestment of extra tax revenue from cannabis sales could could account for some of the improvements in valuations.
There’s also the realization that a dispensary isn’t the bad neighbor that some feared. In some towns in Massachusetts, dispensaries have sued to get refunds on “community impact fees,” claiming that the towns have seen no financial impact from allowing the operations. Pittsfield recently settled such a case, paying nearly $800,000 to three dispensaries.
Other settlements have come form Boston, which returned nearly $3 million in fees to local cannabis businesses, while the town of Uxbridge paid $1.2 million to settle with one retailer.